Cocoa finds end user demand on cheap prices

General Comments: Futures closed higher on what appeared to be speculative buying. Ideas are that USDA can show smaller crops due to the greening disease that has been reported in Florida. USDA has cut production potential in the previous two estimates and might be forced to trim the estimate a little more next month. Weather remains good in Florida. Temperatures remain mild in the state, and conditions are mostly dry. Forecasts call for mostly dry conditions and mild temperatures to continue after some overnight showers and storms. Forecasts do not call for any threatening temperatures, but dry weather is creating ideas that more fruit can be lost. Fruit is holding for now, and irrigation is being used by producers to hold crop condition. Harvest in Florida of mid and early oranges is continuing, and the Valencia harvest is underway. Weather in Brazil is reported to be good. Brazil is seeing near to above normal temperatures and scattered showers. Harvest is continuing, so an increase in supplies should be expected at this time of year.

Chart Trends: Trends in FCOJ are up with objectives of 123.00, 125.00, and 131.00 March. Support is at 116.00, 113.00, and 110.00 March, with resistance at 123.00, 126.00, and 128.00 March.

COFFEE

General Comments: Futures were lower after a session with little news to push prices one way or another. Prices remain in the recent trading range, with bulls talking about the losses from rust in Central America and the bears noting that there is more than enough coffee being produced in other countries to cover the losses seen in Central America. The problem is serious there, with all countries being affected. Conservative crop estimates put the losses at about 25%, and some say the percentage lost is higher and could be 35% or more. Current crop development is good this year in Brazil, and production areas are getting beneficial showers for the developing crop. Production ideas remain big there, and also remain big in Vietnam even though producers there talk about the potential for 25% crop losses. Central America crops are mostly harvested. Colombia is reported to have good conditions.

Overnight News: Certified stocks are higher today and are about 2.618 million bags. The ICO composite price is now 134.41 ct/lb. Brazil should get mostly dry conditions this week and scattered showers and storms this weekend and into next week. Temperatures will average near normal. Colombia should get mostly dry conditions, and Central America and Mexico should get mostly dry conditions. Temperatures should average near to above normal. The ICO said that world Coffee exports were 9.42 million bags in December, up 3.1% from December, 2011. Year to date exports are now 28.3 million bags, from 24.6 million the previous marketing year.

Chart Trends: Trends in New York are mixed. Support is at 145.50, 142.50, and 141.00 March, and resistance is at 151.50, 154.50, and 158.00 March. Trends in London are up with objectives of 2010, 2070, and 2100 March. Support is at 1985, 1980, and 1960 March, and resistance is at 2020, 2040, and 2050 March. Trends in Sao Paulo are mixed to down with objectives of 179.00 March. Support is at 181.00, 179.50, and 179.00 March, and resistance is at 185.00, 188.00, and 190.00 March.

SUGAR

General Comments: Futures closed higher again in consolidation trading. The market now is in a trading range. Most traders still note that big supplies appear to be available to the market, but supplies might be dropping as Brazil said it will increase the ethanol in its gasoline blends in May. There are ideas that this could help work off a lot of the surplus production in Brazil and could tighten world balance sheets. Most buyers are not worried about prices and are not chasing rally attempts. Most statistical organizations continue to look for a big surplus production for the year. Production has been strong in Brazil so far this year, and reports say that the new crop production looks to be strong as well. Exports from Brazil continue to be very strong after the delayed start to the program. The Thai crushing season is underway with good production expected, but the crushing pace remains slow. It is possible that the crop size there has been overestimated. Traders wonder if and when India will cut offers to the market due to the lower prices and perhaps less than expected production due to some dry weather at the beginning of the growing season.

Overnight News: Scattered and light showers are expected in Brazil through this weekend. Temperatures should be near to above normal.

Chart Trends: Trends in New York are mixed. Support is at 1825, 1805, and 1770 March, and resistance is at 1895, 1905, and 1920 March. Trends in London are mixed. Support is at 490.00, 480.00, and 475.00 March, and resistance is at 501.00, 503.00, and 515.00 March.

About the Author

Jack Scovilleis a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988. Jack writes daily commentaries - Morning Grains and Softs, in both English and Spanish and is regularly quoted around the world by news & wire services including Dow Jones, AP, Bloomberg, and Reuters. You can contact Jack by phone at (312) 264-4322 or by email at jscoville@pricegroup.com. Learn even more on our website at www.pricegroup.com.

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